Krones, the leading filling and packaging technology manufacturer, published its report for the first half of 2021. Following a successful start to the 2021 financial year, the business continued to develop dynamically between April and June. Overall, Krones’ markets have so far recovered faster than expected from the pandemic-related downturn.
Strong demand for Krones products and services
Order intake increased by 58.3% relative to the second quarter of 2020, to EUR 975.5 million in the second quarter of 2021. In the first six months of 2021, the contract value of orders went up by 40.3% year on year to EUR 2,044.3 million. The order intake in the first half of 2021 was higher than the prior-year in all of Krones’ sales regions. As of 30 June 2021, the company had an order backlog totalling EUR 1,535.5 million. This marks a significant increase in the order backlog compared with the beginning of 2021 (up 26.8%) and a year earlier (up 35.5%).
It should be noted concerning the revenue performance that revenue in the first quarter of 2020 was hardly affected by Covid-19. Revenue in the first half of 2021 consequently showed only a slight year-on-year increase of 1.3% to EUR 1,720.1 million. In the second quarter of 2021, on the other hand, revenue showed solid year-on-year growth to some EUR 845.5 million, marking a rise of around 11.7% on the prior-year quarter.
Krones significantly improves profitability and free cash flow
Despite rising costs, notably of materials and freight, Krones’ profitability improved significantly from January to June 2021. This was most of all to structural measures that the company has launched and already implemented. Earnings before interest, taxes, depreciation and amortization increased 16.2% year on year in the first half of 2021, from EUR 118.5 million to EUR 137.7 million. The EBITDA margin increased to 8.0% (previous year: 7.0%). EBITDA includes a Covid-19 bonus for employees totaling around EUR 5 million paid out by Krones in the second quarter. Nevertheless, in the second quarter of 2021, at EUR 61.2 million, EBITDA was more than twice as high as in the previous year (EUR 29.0 million).
Krones’ earnings before taxes (EBT) increased significantly year on year in the first half of 2021, from EUR 31.8 million to EUR 75.7 million. In this connection, EBT in the previous year was affected by EUR 13.6 million in goodwill impairments. In total, Krones generated a consolidated net income of EUR 56.9 million from January to June 2021 (the previous year: EUR 21.5 million). Earnings per share consequently went up from EUR 0.68 in the previous year to EUR 1.80.
Krones significantly improved free cash flow in the first six months of 2021 by EUR 100.2 million to EUR 35.4 million (previous year: EUR 64.8 million). The company thus consolidated its strong finances. Net cash and cash equivalents, meaning cash and cash equivalents less bank debt, increased to EUR 203.7 million at the end of June 2021 (previous year: EUR 77.9 million). In addition, Krones had around EUR 1.05 billion in unused lines of credit as of 30 June 2021. Average working capital over the past four quarters increased slightly as a percentage of revenue to 28.1% in the first six months of 2021 (previous year: 27.6%).
Krones remains optimistic for 2021 and has raised its guidance
For the second half of 2021, the company expects demand to stay strong and production capacity utilization to remain stable. Based on the good figures for the first half-year and the positive outlook for the third and fourth quarters of 2021, Krones already raised its full-year guidance for 2021 on publication of the preliminary half-year results on 23 July. For the Krones Group, the Executive Board expects full-year revenue growth of 7% to 9% in 2021 (previously 2.5% to 3.5%). Krones anticipates an EBITDA margin of 7% to 8% (previously 6.5% to 7.5%). For the third performance target, working capital to revenue, the guidance remains unchanged at 26% to 27%.
The guidance for 2021 is subject to the assumption that there will be no severe impacts from the Covid-19 pandemic, problems in supply chains, or other general economic impacts.